EBIA Weekly Newsletter

IRS Releases 2016 Version of Publication 521 on Moving Expenses

   January 26, 2017

IRS Publication 521 (Moving Expenses (for 2016 Tax Returns))

Available at http://www.irs.gov/pub/irs-prior/p521–2016.pdf

The IRS has released its version of Publication 521 (Moving Expenses) for use in preparing 2016 tax returns. The publication explains what types of work-related moving expenses may be deductible on an individual’s federal income tax return and who can deduct those expenses. It also details how and when the deduction is reported. The publication provides a brief overview of the two types of plans that an employer might use (accountable and nonaccountable) to reimburse employees for certain work-related moving expenses, and notes that an employer should tell an employee what method of reimbursement is being used and what records are required. The publication also explains where on an employee’s Form W-2 the reimbursements should be reflected. The only notable change from the 2015 version is that the standard mileage rate for individuals who use their own vehicles to move to a new home has been updated to reflect the applicable 2016 rate of 19 cents per mile, a four-cent decrease from the 2015 rate of 23 cents (see our Checkpoint article).

EBIA Comment: Code § 132(g) allows employers to reimburse employees for certain moving expenses on a tax-free basis, so long as the expenses would have qualified for an individual tax deduction under Code § 217 and the accountable plan rules are met. The types of moving expenses that can be provided tax-free are limited, but some employers go further and reimburse nondeductible expenses. Those expenses, and any deductible expenses for which the accountable plan rules are not met (e.g., expenses that are inadequately documented), are treated as paid under a nonaccountable plan and result in taxable income for employees. Publication 521 provides an overview of some of the choices available to employers when designing moving expense benefits for employees, but its main purpose is to help individuals determine which of their moving expenses may qualify for a deduction and how to account for any employer reimbursements. For more information on employer-provided moving expense benefits, see EBIA’s Fringe Benefits manual at Section XVII (“Moving Expense Benefits”); for a discussion of the accountable plan rules, see Section II.E (“Employee Business Expense Reimbursements”).

Contributing Editors: EBIA Staff.